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What is behind the precious metals price drop?

291fifth291fifth Posts: 23,880 ✭✭✭✭✭
I don't follow the precious metals market since I have virtually no stake in it.

Can someone explain just why the current drop is taking place?

All glory is fleeting.

Comments

  • the strength in the dollar. germany is in a recession and the japanese economy is falling off a cliff....
  • fcfc Posts: 12,788 ✭✭✭


    << <i>the strength in the dollar. germany is in a recession and the japanese economy is falling off a cliff.... >>



    i would agree with that. many thought the US economy was in
    the toilet but as usual the US has more resilency then it appears
    in the doom and gloom days of bear stearns tanking.

    as the dollar goes up, oil and PMs go down.


  • << <i>the strength in the dollar. germany is in a recession and the japanese economy is falling off a cliff.... >>



    Amongst a few other things... that is basically it. Most commodities are denominated in dollars... so when the dollar falls, they rise. When the dollar rises, they fall...

    That isn't the whole story but my guess as to why they have been dropping the last month...
  • PlacidPlacid Posts: 11,301 ✭✭✭
    I also think the people that were dumping stocks and moving their money into pms are now selling their pms and going back into stocks are contributing to the price drop.
  • More supply than demand......................
  • Everybody fleeing the commodity sector at once, thinking the dollar has finally bottomed.

    It's the leverage that causes these kinds of violent moves-- everybody was probably margined
    up to their eyeballs in PM (and other commodity) futures, playing the anti-dollar trade.
  • Simply put, traders no longer see it as a good inflation hedge.
  • MrEurekaMrEureka Posts: 23,868 ✭✭✭✭✭
    I'd argue that the unexpectedly sharp drop in oil is the dominant factor. The slowing of other economies around the world was expected, as was the resultant strengthening of the dollar. So the only significant thing that wasn't already factored into the market a few weeks ago was oil.

    image
    Andy Lustig

    Doggedly collecting coins of the Central American Republic.

    Visit the Society of US Pattern Collectors at USPatterns.com.
  • derrybderryb Posts: 36,072 ✭✭✭✭✭
    dollar appears stronger because foreign currency are undergoing inflation. Dollar has not gained any value it its own economy it only appears stronger. Fundamentals still remain: Weakening economy, rising infaltion. Once oil start reflecting inflation again, off we go. Don't miss this PM buying opportunity.

    The decline from democracy to tyranny is both a natural and inevitable one.

  • storm888storm888 Posts: 11,701 ✭✭✭
    "...Fundamentals still remain: Weakening economy, rising infaltion. Once oil start reflecting inflation again, off we go. Don't miss this PM buying opportunity. ..."

    ///////////////////////////////////////////

    It is a terrible thing when the "correct" analysis leads to the wrong action.

    The banks have joined the ranks of the peasants and now have NO cash.
    THAT is ALL that is happening here; and, it is just getting started.

    There will be a time to again be VERY long PMs. That time is pretty far away.

    There is nothing wrong with nibbling at SLV, and being prepared to average
    down toward $6. But, being SHORT SLV is where the big money will likely be
    made into 2009.

    Folks Who Bite Get Bitten. Folks Who Don't Bite Get Eaten.
  • jmski52jmski52 Posts: 22,289 ✭✭✭✭✭
    The banks have joined the ranks of the peasants and now have NO cash.
    THAT is ALL that is happening here; and, it is just getting started.


    This does put precious metals accumulation into a holding pattern, but........isn't Ben's mandate to drop new cash welfare handouts to bankers all over the place?

    It remains to be seen how much more liquidity the Fed will inject to replace the loss of bank capital. The money has to come from somewhere, and the Fed is just about the only remaining possibility.

    True, the question is whether or not the Fed can inject capital faster than the imaginary assets of the hedge funds is being destroyed, but that's what makes physical precious metals attractive, at any price.

    The Fed, the banks, the regulators, the politicians - none of them engender much confidence, regardless of this "dollar rally" that may or may not be a dollar rally. My guess - it's not a dollar rally any more than most Olympic athletes are amateurs.

    I think that this dollar and stock market rally is the setup. There are alot of diversions all taking place at the same time. The American Economy does a 180; the Olympics; the Election - the credit crunch and mortgage crisis fade from consciousness......

    888, your short term predictions were prescient. I'd be curious to know who you work forimage
    Q: Are You Printing Money? Bernanke: Not Literally

    I knew it would happen.
  • I am seeing an entirely different scenerio with the drastic drop in PM's.
    I believe that PM's are being brought down because of the recent actions that are unfolding in Russia/Iran/Israel as we speak.
    As soon as the hedges feel a bottom, I feel the PM's will shoot up even faster than they have dropped.
    Fear can make one sell the farm when in actuallity he should be holding firm to what is rock solid.

    Audentes fortuna juvat


  • << <i>
    As soon as the hedges feel a bottom, I feel the PM's will shoot up even faster than they have dropped.
    >>



    I don't know if the geopolitical tensions are the main cause, but I agree that a violent upside move is possible soon.
    There is definitely something BIG going on behind the scenes to cause PMs to 'act' this way. It's a precursor to
    something dire, I'm assuming.
  • dcarrdcarr Posts: 7,919 ✭✭✭✭✭
    Somewhere some major hedge funds are in trouble, and are being forced to liquidate.

    Remember Refco ? They were very long on natural gas futures. The contracts were trading at about $9. A bigger fish came along and smelled blood. They forced the price down far enough that Refco was forced to liquidate their position due to margin calls. Natural Gas futures went all the way down to $3 or something like that. Refco got eaten for lunch. Investors in Refco suffered the same fate, of course. After Refco went belly-up, natural gas contracts quickly went back up to where they were before ($9-$10 or whatever).

    I would recommend NEVER leveraging a position, and just wait things out if necessary.

  • jmski52jmski52 Posts: 22,289 ✭✭✭✭✭
    I just looked on Kitco's home page at the currency exchange chart, and I see that gold has dropped between 1.3% and 2.7% against *all* currencies, not just the dollar.

    This can only be correlated to the drop in oil prices, which would be a common factor. Either that, or a worldwide breakout in fiat currencies to the upside, due to the widely-anticipated and flourishing worldwide prosperity that is suddenly upon us.

    Pretty weird.

    Q: Are You Printing Money? Bernanke: Not Literally

    I knew it would happen.
  • Other's have said: strong $, Gold was overdone on the upside, trends (down in this case) last a while until sellers/buyers done, oil down.

    'Usually', the best way to buy any market is to buy extreme weakness slowly and hang on (managing your risk by not taking too large of a position initially). Of course, this wouldn't work if Gold goes to $500.

    I only have a few Gold coins but started a small Gold position via Gold futures. Seems like it should bounce soon on Geo-political alone ...
    Diplomacy
  • ElcontadorElcontador Posts: 7,411 ✭✭✭✭✭
    In addition to the above, European powers that be decided NOT to raise interest rates in the Euro Zone, while it was widely anticipated that they would do so. Commodity pricing is interest rate sensitive, as are currencies.

    A lot has to do with perception, not reality. Speculators / hedge funds spend fortunes on models guessing what will happen next and put money there in anticipation of these events. Then word gets out and Johnny come lately do likewise. Oftentimes, these models are correct, while sometimes they are full of ****, and Johnny come latelys usually are the ones who buy high and sell low.

    As long as the world economy is in flux as it is right now, imo, NOTHING looks good as far as investing is concerned. If you have some cash and owe $ on consumer debt, the best thing you can do is pay that debt down. Forget about PMs, forget about equities, forget about coins.
    "Vou invadir o Nordeste,
    "Seu cabra da peste,
    "Sou Mangueira......."
  • Latest additions to the hedge fund "implode-o-meter"

    Last addition: August 15, 2008. (All)

    * Turnberry Capital Management
    * Absolute Capital Management
    * Lydia Capital
    * Endeavour Capital
    * Old Lane Partners (Citigroup)

    I bet all of these funds were leveraged in commodities.
  • TwoSides2aCoinTwoSides2aCoin Posts: 43,765 ✭✭✭✭✭
    Some things are more important than others.
  • I'm holding on to what little I have and will add to it as I can afford to do so.

    This is like dollar cost averaging into any other investment until I accumulate what I want. I will say the roller coaster ride in PM's is a bit more exciting than in mutual funds.... although they can move dramatically, also.

    Without the auto market and with alternatives being developed, most of of the platinum potential will be in coins and jewelry. Speculation is waning in all of the metals presently. The dollar is stronger and that effects all other currencies including gold. I'm still with gold and silver though.
  • fcfc Posts: 12,788 ✭✭✭
    how about that miners are bringing it out of the ground for about
    350-450 an ounce and once people get their fill of speculation they
    can easily supply it as needed.

    supply and demand. demand dies and miners will gladly sell at 600.
    Nice profit for them.
  • don't buy new from the uS Mint!1

    Its all overpriced .....!
    Buy only pre 1933 coins.


    image
    Ships are safe in harbor but thats not what ships were built for.
  • COALPORTERCOALPORTER Posts: 2,900 ✭✭
    Some very smart people are behind it, you can bet...
    much smarter than most of you !! imageimageimage
  • It is clearly all of the gold and silver that is being dumped in Beijing. Once that is absorbed into the market, things will stabilize again.image
  • Recession = drop in the price of precious metals
    -Rome is Burning

    image
  • Where is a good place to buy silver, current melt. Can silver "stock"(not sure what to call it) be bought on the exchange for current melt?
    Trustworthy BST sellers: cucamongacoin
  • BECOKABECOKA Posts: 16,957 ✭✭✭
    I'm still betting this is temporary. Let's see what happens after the elections are done and settled down. image
  • ebaytraderebaytrader Posts: 3,312 ✭✭✭


    << <i>More supply than demand...................... >>




    Not in the physical market. Bullion is not available at anything close to spot.
  • sbeverlysbeverly Posts: 962 ✭✭✭
    More supply than demand......................

    What's so very strange is that the (physical) supply is drying up.

    Many bullion dealers are reporting less supply because of high demand
    (most noteably silver)

    There is a major disconnect between the Futures and Physical markets.

    Does anybody know of a way to Arbitrage this discrepancy?
    Positive transactions with Cladiator, Meltdown, ajbauman, LeeG, route66,DennisH,Hmann,FilamCoins,mgoodm3,terburn88,MrOrganic, weg,dcarr,guitarwes,Zubie,Barndog,wondercoin,braddick,etc...
  • Hilarious! CLOWN TALK

    " Goldman Sachs slashed its forecast on gold prices on Thursday, citing overvalued bullion and expected strength of the dollar against major currencies. The U.S. brokerage said it lowered its 3-month gold outlook to $745 an ounce from its previous view of $890 an ounce.
    "The US dollar has recently begun to show initial signs of strength as the fundamental picture for the dollar has improved substantially in recent weeks," Goldman told clients in a research note. Goldman said that according to its model, gold had overshot its fair value over the past few weeks and the metal is now trading near its price estimate. Goldman also cut its gold forecast to $810 from $905 on a 6-month basis, and to $740 from $810 on a 12-month basis.
    The dollar has recently soared against the euro -- which fell below $1.48 to its weakest level since February. Meanwhile, the price of gold has tumbled in the past 30 days. It traded at $812 an ounce on Thursday, sharply below its recent high of $987.75 set on July 15. A higher greenback makes dollar-denominated gold more expensive for investors holding other currencies. Gold is also used as a hedge against the falling U.S. dollar. Last Thursday, UBS investment Bank also cut its one-month gold forecast by 15 percent to $850 an ounce from $1,000 an ounce, citing improving risk appetite, stronger equities and a firmer dollar.

    Last November, Goldman told investors to sell gold in 2008 to take advantage of the falling prices as the dollar steadied, and it named the strategy as one of its top 10 tips for this year."


    Jon Nadler is an absolute idiot if he can't see that! I am amazed he's paid to be the clown that he is. Does it ever hit him to look up November 2007's price? Nope, because Gold was $761 then when Goldman made that "smart" prediction.

    The other idiots were wrong too! This year wrong! BUT!..they get to change the number after it has ALREADY BEEN VISITED!


  • coolestcoolest Posts: 2,281 ✭✭✭
    Is there really a drop in price if sellers are still asking prices based on what they paid? Can you really buy gold or platinum for near the spot price or is the spot price some theoretical value? Is someone selling platinum for $1400/oz?
  • Key to Gold is look at the hedging of the Producers, the various Central Bank's selling, the PM Banks' Leasing of Gold + the Future Prices 5-8 months out.

    Spot is just a reflection of these other variables above, if you have this other information.

    1.) I do not like the fact that the Producers have been taking off hedges. What's happening now could be a way to force them back into selling future production now.
    2.) All of the Central Banks have NOT been selling quota (400 Million Ounces per bank) Good
    3.) Leasing of Gold involvement of Investment Banks = this is the EVIL and where the manipulation is happening from the likes of Goldman, UBS, etc. They are turning Physical Gold into Fractional Reserve Lending outside of the Central Banks. BAD
    4.) I do like the fact that real interest rates or -3-4% GOOD

  • derrybderryb Posts: 36,072 ✭✭✭✭✭

    The decline from democracy to tyranny is both a natural and inevitable one.

  • roadrunnerroadrunner Posts: 28,303 ✭✭✭✭✭
    Recession = drop in the price of precious metals

    That worked in the early 1990's to some extent but not in the 1970's. It didn't work during the great depression either. We're looking a lot more like we're heading into the 1970's or 1930's right now than the early 1990's.

    Good advice is usually to do the opposite of Goldman's long term gold predictions. In 2007 and 2008 they consistently faked left, took a position opposite to that, and then unloaded shorts or longs to attempt to profit. Their paper gold plays over the past several years have been a net losing position. So it's possible they do that to be able to control the gold price to profit elsewhere and live to fight another day. Goldman continues to reduce their Tocom gold shorts with an expected date in November to have them all removed. Either they are building shorts elsewhere, or expect gold to break out again big-time in November.

    roadrunner

    Barbarous Relic No More, LSCC -GoldSeek--shadow stats--SafeHaven--321gold
  • storm888storm888 Posts: 11,701 ✭✭✭

    Looks like somebody won.


    GLD 52wk Range: 64.56 - 100.44

    SLV 52wk Range: 11.38 - 20.73
    Folks Who Bite Get Bitten. Folks Who Don't Bite Get Eaten.
  • Roadrunner is right on.

    I think someone is trying to unwind some complicated derivatives or some other scheme (using the generic word) to aquire on the other side of the trade.

    All of the manipulation is taking place 3-7 hours after the close in New York.

    It is being done off-shore.

    Oh, and BTW, the spewings of Jon Nadler are banned from my computers.
  • BearBear Posts: 18,954 ✭✭
    We have discovered that the
    100 story financial building
    we are currently inhabiting,
    was erected without the
    first 10 floors , or a foundation.
    There once was a place called
    Camelotimage
  • At any rate, when market confidence is damaged sufficiently, we can move in. We unwind our new short positions in the futures market, by buying back huge number of long positions at very low prices on the COMEX. We also unwind an exponentially larger number of positions inside the shadow world of "dark pools", which are little known secretive private exchanges, controlled by the big banks. It ended up costing us some money, but not a lot compared to the money we’ve avoided losing. We’ve paid subsidies on the leases, but we’ve never actually had to buy the gold or silver, because there isn’t any available, and none in our vault. This is the way that a group of big bullion banks could induce a price collapse to unwind hundreds of billions of dollars worth of potential losses, or position themselves to go long on hundreds of billions of dollars worth of potential profits.

    Just like I was talking about the other Day! Unwinding!
  • BearBear Posts: 18,954 ✭✭
    OK I think I have it now.

    My money is contracting
    while the dollar is surging

    My home is declining
    while inflation is increasing

    My wages are frozen
    but my credit is melting
    There once was a place called
    Camelotimage
  • 500Bay500Bay Posts: 1,106 ✭✭✭
    In a deflationary enviornment the dollar would increase in value. (supply and demand)

    After a rapid growth in the money supply over the last few years, restricting money supply would be a good thing.
    Finem Respice
  • percybpercyb Posts: 3,301 ✭✭✭


    << <i>More supply than demand...................... >>



    There's been a lot less demand for jewelry year over year...from 07 to 08. 50% less demand in India, 25% less in China.
    "Poets are the unacknowledged legislators of the world." PBShelley


  • << <i>dollar appears stronger because foreign currency are undergoing inflation. Dollar has not gained any value it its own economy it only appears stronger. Fundamentals still remain: Weakening economy, rising infaltion. Once oil start reflecting inflation again, off we go. Don't miss this PM buying opportunity. >>



    image
    I think your dead on! Plus it's a election year, & there trying to make things seem better! For now, anyways
    SEE the BULL!! BUY the BULL!! BE the BULL!! Do your homework first. And, you will learn alot!!
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